Reaction to ARM’s Deal: W.Savage, D.Kelf, H.Barbour

Who better qualified to post reactions to this week’s astonishing news out of Tokyo and Cambridge – SoftBank is buying ARM in an all-cash deal for 24.3 billion British pounds – than the leaders of two highly regarded IP companies and an articulate Brit with total street cred in EDA.

******************Warren Savage, CEO at IPextreme

Warren and I spoke by phone late on Monday, less than 24 hours after the ARM/SoftBank deal was announced.

To drive home the significance, he added, “It’s one of those almost Black Swan-ish type of events that’s caught everyone by surprise, and will have significant ramifications for the whole landscape of the semiconductor industry.”

I asked Warren what it means for his own organization.

He said, “It certainly shows how important IP is at the industry level. Beyond that, I just don’t know.

“Probably every IP company in the world is trying to answer that question – What does it mean for us? – because we’re all back on our heels as far as trying to figure what this means for ARM. It changes the entire processor landscape.

“Earlier today, someone else asked what I thought about the news and I made this analogy: Previously, the game board of semiconductor IP was well established, with all of the players placed on the game board in a structure that everyone understood and made sense.

“Now [with this news], it’s as if someone has taken their hand and swept all of the pieces off the board and on to the floor.

“Yes, the game board will reassemble – perhaps in the same way and perhaps in a different way – but everyone in the entire tech industry will now have to figure out where they fit into all of that. It’s that significant.

“Frankly again, we’re all shell-shocked!”

******************Dave Kelf, VP of Marketing at OneSpin

Dave and I communicated via email on Monday when I asked for his feedback on the ARM/SoftBank deal.

Dave’s response was quick and emphatic: “Fascinating, eh!”

He continued, “So, I have been thinking about this and chatting to a few people here and there, and these are my thoughts based on that.

“On the one hand, given the financial might of SoftBank and its core businesses, this deal will allow the new ARM to accelerate development in areas that revolve around wireless connectivity – for example, IoT and Automotive – as well as put more backing into their server onslaught of Intel, who must have been made nervous by this deal.

“On the other hand, the shifting of control of ARM’s fortunes to the SoftBank management is bound to get the attention of key customers who might wish to accelerate open source competition such as the RISC-V project. Last week’s conference on this subject at MIT attracted a veritable Who’s Who of senior engineers across the industry.

“So this deal could drive a change in ARM’s direction – yet another consequence of Brexit, which has made British companies vulnerable to foreign takeover.

“This Brexit thing is going to shake up a lot more than people realize!“

******************Hal Barbour, Chairman of the Board at CAST

Hal and I spoke mid-day Monday and started with Hal’s evaluation of how the overall IP industry is doing today.

“It’s relatively flat right now,” Hal said. “The heyday of the industry that lead to the proliferation of laptops, portable personal devices, smart phones and tablets – frankly, those markets that fueled a lot of growth for the IP industry have saturated.

“Today instead we are seeing growth in other areas. Automotive continues to be strong, and IoT shows growth as well.

“The IoT market, however, is so fragmented it is really different things to different people in different markets. IoT is far more fragmented than the computer, networking, or personal device markets ever were.

“More importantly, a lot of the processors out there already control the IoT well – everything from 32-bit machines to application processors – while the area for biggest contributions in IoT will be in analog/mixed-signal and low-power communications. These things coupled with processors have a very good future.

“Nonetheless, as far as the IP industry is concerned, it’s kind of flattened out because of a slowing of growth in the markets.”

“A perfect segue to the ARM/SoftBank deal,” I said. “Is that acquisition actually being fueled by the IoT market as so many analysts are saying today?”

Hal responded, “Yes, the ARM news sure was a big surprise. Not too many people saw that coming!

“Generally speaking, however, acquisitions and outside investments are good if they bring in more than just money – after all, everyone around the world has money.

“It’s insight on the part of the investors, a strategy, [an idea that] the acquired company will be an additional peg in that overall strategy – these are the things that make acquisitions meaningful.

“In the case of ARM you have to ask, does SoftBank expect to develop a really strong strategy for bringing everything together in IoT?

“I think it would be surprising to find that’s the case. I do understand that their strongest technical background is in communication – people who understand the telecomm industry fairly well – but I’m not sure about IoT.

“Of course, as far as ARM is concerned, they’ve already got a pretty good part of it – NXP/Freescale, TI, and so on – all of these people already use ARM cores.

“So is anyone really suggesting that ARM [grow] by putting together a strategy to compete with their primary customers in those markets? If they are, that would be a pretty risky proposition.

“There are other people who are far more familiar with the Japanese market, however, people who spend a lot of time over there and may understand this better – but I don’t really see the advantage to ARM.

“Let’s face it, SoftBank is a bank. These are not people with lots of insight into new emerging markets, with a track record of creating solutions for putting everything together.

“Clearly, it’s an all-cash deal so the key employees at ARM are going to be required to stay around for a year or two, but unless SoftBank has a really exciting strategy to pull this all together – again, it’s a risky venture we’re talking about here.”

“Risky for ARM or risky for SoftBank?” I asked.

“For both,” Hal replied, “and for their customers.

“In the short-term, it won’t have a lot of effect – you’ll still have all the people at the company and their products – but no potential customers are going to say, ‘Yeah, SoftBank! Let’s go with ARM!’

“Instead of enthusiasm, in fact, there will be trepidation. There just aren’t a lot of entrepreneurs that see having a big bank in charge of a company’s technology as being an upside.”

“Will there be any impact on CAST?” I asked.

“If anything,” Hal replied, “it will have a positive impact on CAST.

“When people are looking for very low power, or looking for a low-cost or royalty-free type of option, they may give us a better look than they did before.

“Particularly now, as a lot of people may be a bit nervous about the future of ARM primarily because of their new ownership. The new ownership could very well lead people to take their business elsewhere.”

I asked Hal if he thought the post-Brexit weakness in the pound might have influenced the purchase.

“I just don’t see where a bank would wander into something like this – an acquisition of a company as big as ARM that dominates a technology sector – just because of the temporary fluctuation of a currency.

“Again, it only makes sense if you have a vision that will fit with other parts [of your strategy].

“Of course, there may be an entirely solid plan behind all of this. That’s still entirely possible.”